Kwasi Kwarteng, a British member of Parliament who previously worked in finance, raises an intriguing idea. Could China, he opined in a July 24 article for the New York Times, decide one day to wield its foreign-exchange reserves to transform the yuan into something the world hasn't seen for more than four decades -- a gold-backed currency?
As the author of "War and Gold: A Five-Hundred-Year History of Empires, Adventures and Debt," Kwarteng understands the history of the world's previous efforts at underpinning the financial system with the precious yellow metal. As a former analyst at Crispin Odey's asset-management firm, he also knows something about China's dependence on currency devaluations to boost exports, a strategy it relied on for several years until it finally allowed the yuan to appreciate against the U.S. dollar from 2005 until 2008, and again in 2010.
Although Kwarteng says China is unlikely to attempt financial hegemony in the near future, the nation may decide at some point to both abandon and undermine the dollar as the world's reserve currency:....
To read the full article click here